Cullen: Taxes could change bad behaviours

‘‘The possible use of the system to change people’s behaviour in ways which increase the wellbeing of all of us is very much on the agenda’’ Sir Michael Cullen, left.

A wealth tax, a tax on financial transactions, a broader capital gains tax, a land tax and new environmental taxes will all be options considered by the Tax Working Group, its chairman Sir Michael Cullen says.

Cullen said those new taxes would be among the options canvassed in a ‘‘background paper’’ that will be published a week from tomorrow.

The public will be able to make submissions until the end of April, ahead of a draft report in September and a final report in February next year.

The Government established the working group in December to look at ways the tax system could be overhauled after the 2020 election.

Speaking to the International Fiscal Association conference in Queenstown on Friday, Cullen gave several strong clues on his own thinking on the direction of the tax system. Cullen appeared warm to the idea of taxes on environmental and social ills, such as greenhouse gas emissions, pollution and the causes of obesity.

‘‘In this summer of 2017-18 there can surely be little argument that the effects of global warming are already with us.

‘‘We face many other environmental challenges such as water pollution, possible over-allocation of water, plastic pollution of the oceans, and congestion, in Auckland especially,’’ he said.

‘‘All this means that the possible use of the system to change people’s behaviour in ways which increase the wellbeing of all of us is very much on the agenda at the present time.’’

It has been widely assumed that the Tax Working Group will back a broader capital gains tax, for example on income from investment property and shares.

Cullen did little to damp down that expectation, saying New Zealand had a ‘‘very narrow range of taxes by international standards’’.

‘‘The most obvious area of narrowness is the very limited scope of our current capital gains tax regime. That reflects a long New Zealand tradition, the basis of which is hard to discern,’’ he said.

Because of an ageing workforce the Government might have to become more reliant on taxing capital gains and less reliant on taxing wages, he said.

Deloitte tax expert Bruce Wallace said a broader capital gains tax or a wealth tax was ‘‘clearly part of the current consideration and debate’’.

The possible alternative of a tax on financial transactions would be ‘‘a bit different’’, he said.

‘‘It is not hugely common in this part of the world and hasn’t been a real part of the discussion to date, but obviously all things are on the table.’’

Capital gains taxes typically ‘‘didn’t collect a whole lot of tax’’ and were complex to implement and for taxpayers, he said.

‘‘The traditional thinking has been the cost-benefit analysis is marginal.’’

Cullen said taxes were normally higher in richer countries than in poorer ones and said New Zealand’s tax system did less, compared to most in the OECD, to redistribute money from the rich to the poor.